Market prediction based on macroeconomic indicators - page 19
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It's a temporary phenomenon, the point of it is to get the loan capital out of China and back into the funding currency, the Euro.
For a while the scheme was simple as hell - you take an almost free loan in euros, let's say 10 lakhs, put it into the Chinese stock market (which was constantly growing), and for six months you smoke bamboo, after six months you close with 30% profit, return the loan, put 3 lakhs of euros in your pocket. The collapse of the Chinese stock market and the devaluation of the yuan scared people a lot and capital ran back.
Further, one can assume that if investors smell a future financial storm, they will wait out in a safe haven - the U.S. Treasuries. That is, these capitals will go from Euro to dollar.
Makes sense. Only it could be that they will buy China and it won't grow. Maybe they were bought by insiders who know a bit more?
It was also said on the news somewhere that there was a record influx of individuals into the stock market in China and now they are closing accounts en masse.
Anyway, there's about a panic going on there now, about the yuan exchange rate, they're broadcasting on the zombie TV.
But imagine a country with a population of a billion people and if at least a third of them go to buy dollars, euros or some other currency with yuan...
I've written before: cars, smartphones, McDonald's. Even if some of these "American goods" are made in China, American companies need to convert their profits back into dollars making 10% less profit than before the RMB depreciation. American companies suffer.
I've been wondering for a while now. Don't corporations hedge currency risk in futures or something else? Of course, the market capacity may not be enough in futures. Maybe with some other instruments?
Once, when there was an oil rally in the mid-'00s, one of the airlines said that hedged against a rise in energy prices and their growth did not bother him.
I've been wondering for a while now. Don't corporations hedge currency risk in futures or something else? Of course, the market capacity may not be enough in futures. Maybe with some other instruments?
Once, when there was an oil rally in the mid-90s, one of the air carriers said that hedged against the growth of prices for energy carriers and that their growth did not bother him.
Of course they hedge, but any hedging is an additional expense, a loss of profit. It's like insurance - if the insured event happens, fine, but if it doesn't, you've just thrown your money away. That's why everybody tries to optimize a hedge.
euro/dollar expect to rise . over 1,000 pips with a correction of no more than 50% by the end of this year!
Fundamental analysis - America is fabricating economic indicators\ China - economic indicators are falling .
Technical analysis - open the monthly chart of the euro\dollar and look at 07.2014 - 03.2015 and there was not even a 32% correction in this area
euro/dollar expect to rise . over 1,000 pips with a correction of no more than 50% by the end of this year!
Fundamental analysis - America is fabricating economic indicators\ China - economic indicators are falling .
Technical analysis - open the monthly chart of the euro/dollar and look at 07.2014 - 03.2015 and there was not even a 32% correction in this area
I wrote somewhere on this site, I think at the beginning of summer, that by the end of the year, the main pair will be somewhere between 1.2-1.3 - this will be because of the change of expectation for the US rate increase. Now some are expecting a rate hike in September, but most are confident of a December hike. The effect of the strong dollar, which has been weighing on the American economy for almost a year now, will start to show itself in all its glory by autumn and the Fed will have to postpone an increase for longer and longer periods which will naturally push EUR/USD up. Additionally, in September-October the expiry date of shale gages will come and revaluation of their credit portfolios will start (end of fiscal year), credit portfolios are linked to the oil price, and it has fallen by half for the year - in general, preturbations in the shale sector will be taking account of the multiplier and will strain the whole economy, which will not be in the best shape as it is because of the strong dollar.
In the coming weeks - late August early September the euro will move down on expectations of the first rate hike in September. The key point here will be the jobs data on Friday September 4th, accordingly the 1-2nd exchange rate will be at lows, somewhere between 1.075-1.085. If the jobs figure is strong - 220 or more - the exchange rate will drop another 100-150 pips and stay in a small range until the September 17 FOMC meeting. But if the employment data is weak, below 180 tones, and God forbid the unemployment rate rises, the action will be great - on Friday evening, the 4th, it will go up by 200-250 and will move towards 1.12-1.14 till the 17th.
If they do raise the rate in September (which is highly unlikely), the exchange rate may fall to a low of 1.04-1.05 by the end of September, and if they do not (most likely), the rate will be 1.14-1.17 by the end of September.
I wrote somewhere on this website, I think at the beginning of summer, that by the end of the year, the main pair will be somewhere between 1.2-1.3 - this will be because of the change of expectation for the US rate hike. Now some are expecting a rate hike in September, but most are confident of a December hike. The effect of the strong dollar, which has been weighing on the American economy for almost a year now, will start to show itself in all its glory by autumn and the Fed will have to postpone an increase for longer and longer periods which will naturally push EUR/USD up. Additionally, in September-October the expiry date of shale gemstones will come to an end, and they will start revaluing their credit portfolios (end of fiscal year) - credit portfolios are tied to the oil price, and it has fallen by half for the year - in general, preturbations in the shale sector will put pressure on the whole economy, which will not be in the best shape as it is because of the strong dollar.
In the coming weeks, late August early September, the euro will move downwards on expectations of the first rate hike in September. The key point here will be the jobs data on Friday September 4th, so the exchange rate will be at lows, somewhere between 1.075 and 1.085 on the 1st and 2nd. If the jobs figure is strong - 220 or more - the exchange rate will drop another 100-150 pips and stay in a small range until the September 17 FOMC meeting. But if the employment statistics are weak - will be under 180, and God forbid the unemployment will rise, then the action will be fantastic - on Friday evening of the 4th, it will go up by 200-250 points, and then till the 17th, will move to 1.12-1.14.
If they do raise the rate in September (which is highly unlikely), the exchange rate may fall to a low of 1.04-1.05 by the end of September, and if they do not (most likely), the rate will be 1.14-1.17 by the end of September.
A rate hike in September is unlikely. From Fed minutes:
"Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point. Participants observed that the labour market had improved notably since early this year, but many saw scope for some further improvement"
If translated correctly, here are the hints:
The committee concluded that while it had seen further progress, the economic conditions justifying an increase in the target range forthe federal funds rate had not yet been met. Members generally agreed that further information onthe Outlook would be necessary before deciding whether to implement a target range increase. One member, however, indicated a willingness to take this step at this meeting, but was prepared to wait for additional data to confirm the decision to increase the target range.
My translation:
"Most participants expressed the view that conditions for a rate hike have not yet been reached, although they noticed that these conditions are maturing. Participants saw that the labour market had improved since the beginning of the year, but many saw no need for further improvement.
While there are no economic conditions to raise rates, there are political conditions - pressure on Putin. The Russian economy is based on exports of energy and materials and imports of consumer goods. By making the dollar stronger, the US depresses the price of oil, gold and other materials. At the same time it raises the price of imported products for Russians. Everything becomes more expensive. There is internal pressure on domestic politics in Russia. Purely my opinion. I am not discussing or criticising anyone.